When Pam McClure learned she would save nearly $4,000 on prescription drugs next year, she said, “It seemed too good to be true.” She and her husband are both retired and living on a “very strict” budget in central North Dakota.
By the end of the year, she will have spent nearly $6,000 on medication, including medication to control her diabetes.
McClure, 70, is one of about 3.2 million people with Medicare prescription drug insurance whose drug costs will be capped at $2,000 in 2025 because of the Federal Inflation Reduction Act. 2022 from the Biden administration, according to an Avalere/AARP study.
“It’s wonderful – oh my God. We could actually live,” McClure said. “Maybe I can treat myself to some fresh fruit in the winter.”
The IRA, a climate and health care law that President Joe Biden and Vice President Kamala Harris touted on the campaign trail as one of their administration’s greatest accomplishments, radically reimagined the health insurance system. Medicare drugs, called Part D, which serves approximately 53 million people age 65 and older. or disabled. The administration estimates that about 18.7 million people will save about $7.4 billion next year alone thanks to the personal spending caps and less publicized changes.
The annual enrollment period for Medicare beneficiaries to renew or change drug coverage or choose a Medicare Advantage plan began October 15 and will continue through December 7. Medicare Advantage is the commercial alternative to traditional government-run Medicare and covers medical care and often prescriptions. drugs. Medicare’s stand-alone drug plans, which cover medications typically taken at home, are also administered by private insurance companies.
“We always encourage beneficiaries to really look at plans and choose the best option for them,” Chiquita Brooks-LaSure, who directs the Centers for Medicare and Medicaid Services, told KFF Health News. “And this year in particular, it’s important to do that because the benefits have changed so much.”
The improvements to Medicare drug coverage required by the IRA are the most sweeping changes since Congress added the benefit in 2003, but most voters are unaware of them, according to KFF surveys. And some beneficiaries might be surprised by one drawback: premium increases for some plans.
CMS said Sept. 27 that, nationally, the average Medicare drug plan premium fell about $1.63 per month — about 4 percent — compared to last year. “People enrolled in a Medicare Part D plan will continue to enjoy stable premiums and have a wide choice of affordable Part D plans,” CMS said in a statement.
However, an analysis by KFF, a nonprofit health news organization that includes KFF Health News, found that “many insurers are increasing their premiums” and that large insurers, including UnitedHealthcare and Aetna, have also reduced the number of plans they offer.
Many Part D insurers’ initial premium proposals for 2025 were even higher. To cushion the price shock, the Biden administration created what it calls a demonstration program to pay insurers $15 more per month per beneficiary if they agreed to limit premium increases to $35 to the maximum.
“In the absence of this demonstration, the premium increases would certainly have been larger,” wrote Juliette Cubanski, deputy director of the health insurance policy program at KFF, in her Oct. 3 analysis.
Nearly all Part D insurers have agreed to the deal. Republicans criticized it, questioning CMS’s authority to make additional payments and calling them an election-year political ploy. CMS officials say the government has taken similar steps when implementing other Medicare changes, including under President George W. Bush, a Republican.
In California, for example, Wellcare’s popular Value Script plan went from 40 cents a month to $17.40. The Value Script plan in New York went from $3.70 per month to $38.70, a tenfold increase – and precisely a $35 increase.
Cubanski identified eight plans in California that were increasing their premiums by exactly $35 per month. KFF Health News found that premiums increased for at least 70% of drug plans offered in California, Texas and New York and for about half of plans in Florida and Pennsylvania – the five states with the most of Medicare beneficiaries.
Spokespeople for Wellcare and its parent company, Centene Corp., did not respond to requests for comment. In a statement this month, Sarah Baiocchi, Centene’s senior vice president of clinical and specialty services, said Wellcare will offer the Value Script plan at no premium in 43 states.
In addition to the $2,000 drug spending limit, the IRA caps Medicare co-pays for most insulin products at no more than $35 per month and allows Medicare to negotiate prices for certain of the most expensive drugs directly with pharmaceutical companies.
It will also eliminate one of the most frustrating features of the drug plan, a loophole known as the “donut hole,” which suspends coverage just as people face rising drug costs. , forcing them to pay the full price of drugs out of pocket until they reach a spending threshold that changes from year to year.
The law also expands eligibility for “extra help” subsidies for approximately 17 million low-income people in Medicare drug plans and increases the subsidy amount. Pharmaceutical companies will be required to contribute to the financing of this project.
As of January 1, the new drug insurance will operate more like other private insurance policies. Coverage begins once patients pay a deductible, which will not exceed $590 next year. Some plans offer a lower or no deductible or exclude certain drugs, usually inexpensive generics, from the deductible.
Once beneficiaries spend $2,000 in deductibles and copayments, the rest of their Part D drugs are free.
That’s because the IRA increases the share of the bill borne by insurers and pharmaceutical companies. The law also attempts to curb future drug price increases by limiting the increase in the consumer price inflation rate, which was 3.4% in 2023. If prices rise faster than inflation, drugmakers must pay the difference to Medicare.
“Before the overhaul, Part D incentivized drug price increases,” said Gina Upchurch, a pharmacist and executive director of Senior PharmAssist, a nonprofit in Durham, North Carolina, that advises beneficiaries of Medicare. “The way it is designed now places more financial obligations on plans and manufacturers, requiring them to help control prices.”
Another provision of the law allows beneficiaries to pay for their medications on an installment plan, instead of having to pay a hefty bill over a short period of time. Insurers are supposed to do the math and send policyholders a monthly bill, which will be adjusted if medications are added or removed.
Along with the big changes brought by the IRA, Medicare beneficiaries should prepare for the inevitable surprises that will arise when insurers revise their plans for a new year. In addition to raising premiums, insurers may drop covered drugs and remove pharmacies, doctors or other services from provider networks that beneficiaries must use.
Not having the option to change plans means coverage will automatically renew, even if it costs more or no longer covers needed medications or preferred pharmacies. Most beneficiaries are locked into Medicare Drug and Advantage plans for the year unless CMS grants them a “special enrollment period.”
“We have a system run by private health plans,” said Brooks-LaSure, head of CMS. But she noted that beneficiaries “have the possibility to modify their plans”.
But many don’t take the time to compare dozens of plans that may cover different drugs at different prices at different pharmacies, even though the effort could save them money. In 2021, only 18% of Medicare Advantage drug plan enrollees and 31% of stand-alone drug plan members checked their plan’s benefits and costs against those of their competitors, found KFF researchers.
For free, unbiased help selecting drug coverage, contact the State Health Insurance Assistance Program at shiphelp.org or 1-877-839-2675.
KFF Health News is a national newsroom that produces in-depth journalism on health issues and is one of KFF’s primary operating programs, an independent source of health policy research, polling and journalism. Learn more about KFF.
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